In Israel, a micro-business (osek zair) that moves to file type 44 is exempt from the annual return, from tax advances and from the capital statement, a sworn list of everything a person owns and owes. That is how the Tax Authority has presented the track from the start. At the annual conference of the Israel Tax Advisors Association in Eilat, in October 2026, it emerged that the capital statement part rests on Authority policy. No section of the law stops an assessing office from demanding one, and some offices already have.
Demands that already went out
Moshe Kedar, a CPA and lawyer who sat on the capital statement panel as an adviser, said some assessing offices have already sent capital statement demands to micro-businesses. He recalled that Elishiv Maman, who coordinates the micro-business project at the Tax Authority, had said in lectures that "in principle" the Authority would not ask a micro-business for one. In Kedar's view, that promise was only ever verbal.
The Ramla assessing officer, on the same panel, did not deny it. She drew a line between two situations. A demand sent before the business asked to join the micro-business track stays in force, and the statement has to be filed. For a business that started out as a micro-business, the coordinator may have found something in the file and decided to demand a statement because of it. "A capital statement is an assessment tool," she said, and the Authority has to use it.
Yaron Gindi, president of the bureau, said that during the session he had been messaging Maman to ask how many such demands went out and whether they were justified. According to Gindi, the bureau agreed to leave the exemption out of the law after Maman put an extreme case to them: a micro-business buying a 20 million shekel penthouse with no visible source of money. A case like that should be examined, Gindi said. A demand sent only because a coordinator felt like it should not happen, and he asked the Authority to review the discretion behind each one.
The 30% that explains a growing bank balance
A micro-business deducts 30% of its turnover as a notional expense, with no receipts required. Kedar explained what that means when a capital statement arrives. In his example, a business with turnover of about 120,000 shekels gets a deduction of roughly 30,000 shekels a year. After five years, around 150,000 shekels have built up that were never taxable income but may well be sitting in the bank.
A capital statement compares the growth in a person's wealth with the income they reported. According to Kedar, that accumulated deduction is a legitimate explanation for the growth, much like depreciation, which is booked as an expense without cash leaving the business. The online system could work it out automatically, but he said it will not. Whoever fills in the statement has to add it to the explanation themselves.
When the letter arrives
A micro-business that receives a capital statement demand should first check its date. If it was sent before the request to move to file type 44, the Ramla assessing officer was clear that it has to be filed, and joining the track does not cancel it. If it arrived afterwards, the panel's account is that it should stem from a specific finding in the file.
From 1 January 2027 the statement itself can be filed only through the online system, micro-businesses included. The micro-business guide sets out what else the track exempts a business from, and what it takes to stay in it.